Korn/Ferry -- Look at Doubtful Accounts

Korn/Ferry (KFY) released Q2 results showing an increase from Q1 but a whopping 20% decrease YOY. This was to be expected as managerial overhead is shed the headhunting I mean recruiting I mean Talent Management solutions business is off. They point to a large cash position for liquidity but it has shrunk some $66 million or approximately 25% in the past six months.

A few things to think about. Revenues are down but receivables are up 51% from six months ago. The comparable balance sheet and income statement period do not seem to line up in the selected financial information categories. Quelle suprise!

They also experience bad debts. People actually stiff them after hiring someone. The bad debts are supposedly down from six months ago. $7.5 million is the latest number down from $11.1 million six months ago. So the business is facing tough headwinds.

Receivables jump 51% in absolute dollar amounts. But bad debts are down. This is a very tough conclusion and usually does not hold water in the long run. There is no tangible information offered about bad debts. They do not mention the region or type of client. Receivables now account for some 10 to 15% of the market cap of this stock. Financial institutions report on asset quality. Korn/Ferry needs to do the same.

Who is the auditor here?